Tesla Turns Bearish On Worse Than Expected Quarterly Loss

The stock of Tesla Motors, the American automotive and energy storage company, hit a low of about $156 earlier this month. This translates to a 40% decline in the past eight months. While the supporters of the electric vehicle manufacturer believe that the correction is temporary, pessimistic analysts have a different view.

Fundamentally, the company continues to struggle with negative earnings. Recently the company reported its eleventh consecutive quarterly loss and missed the revenue and earnings estimates of analysts. The net loss for the fourth quarter of fiscal 2015, on an adjusted basis, was $0.87 per share. The analysts were expecting earnings of $0.10 per share. Even the most pessimistic estimation was a net loss of $0.58 per share.

Similarly, the company recorded revenue of $1.75 billion, compared to the analysts’ estimate of $1.79 billion.

Bloomberg Business

The CEO of Tesla Motors, Elon Musk, confirmed that the much awaited prototype of the Model 3 (low-priced car for mass consumption) would be unveiled on March 31st this year. The Tesla’s CEO also claimed that the company would register a profit in the fourth-quarter of fiscal 2016. However, going by the past track record of the company, investors have little to cheer about.

During fiscal 2014 and 2015, by a margin of approximately 10%, the company fell short of its delivery target of 35,000 and 55,000 units respectively. Thus, investors wonder whether the delivery target of 1,600-1,800 vehicles (Model S and Model X combined) per week will be really achieved.

Pessimists argue that most of the hype surrounding Tesla Motors is due to the high oil prices that existed a year ago and not because of the company’s performance. Even if we assume that electric vehicles would rule the roads in the future, still, Tesla Motors have a long way to go considering the fact that Renault-Nissan alliance sells more than three times the number of cars sold by the former. To reach the numero uno position Tesla should beat Toyota, whose revenue is about $227 billion per annum. The yearly revenue of Tesla is about 6 billion, which Toyota realizes in one week.

Musk believes that the Gigafactory would become the largest lithium-ion battery manufacturer in the world. While the vision is certainly appreciable, it should be remembered that there are big players in the battery business, which includes LG and Samsung.

Coming back to electric cars, the high-end manufacturers such as BMW, Mercedes and Audi are all getting ready to launch their own electric cars in the near future. Thus, as of now, further decline of the stock is inevitable.

Technically, as shown in the image below, the stock had touched a low of about $144 and is currently in a short-term uptrend.

The stock, which closed at $168.68 on February 17th, is expected to reverse after hitting a high of about $180. Thus, a binary options trader can purchase a put option with March end expiry. The suggested strike price of the put option is $150.

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